What Awaits the Bitcoin and Crypto Market in 2023?

The article titled Bouncy Castle of the Crypto Trader Digest series published on BitMEX Blog included evaluations of Bitcoin’s price action and possible scenarios in the coming period.

Inflation in the US peaked at around 9% in mid-2022. It is currently descending rapidly towards the critical 2% level. With the US and the world on the brink of a recession, forecasters expect Fed Chairman Jerome Powell to seek every opportunity to move away from current Quantitative Tightening policies. Experts; They say Jerome Powell could highlight the success of his campaign to stop the inflation monster, then point out that he made it safe to turn the money taps back on. So how is Bitcoin expected to react while all this is happening? At this point, in order to obtain a correct output, it is useful to remember two important points regarding Bitcoin.

First, crypto markets stand out as the only markets that are not manipulated by central banks and major global financial institutions. At this point, Three Arrows Capital, FTX, Genesis, Celsius, etc. It is quite possible that allegations and questionable behavior about failed companies such as Had the same situation occurred in the traditional financial system, authorities could have tried to delay the market’s reckoning by supporting failing assets, as they always do. The crypto ecosystem has faced a direct showdown. Accordingly, it cleared itself of badly managed businesses with flawed business models, laying the groundwork for a quick and healthy recovery. The second thing to consider about Bitcoin is that, as it is a backlash against the world’s global fiat money system, its price is largely dependent on the future course of the global liquidity of the US dollar, due to the role of the US as the global reserve currency. Bitcoin has outperformed the smoothed USD Liquidity Index over the past two months.

Looking at the price action of Bitcoin, it is observed that it is currently pumping from a low base. From this, several possible paths forward can be identified, depending on what is fundamentally driving the rally. In the first scenario, Bitcoin could experience a natural bounce from local lows below $16,000. If this rally is indeed a natural rebound from local lows, then one can expect Bitcoin to find a new plateau and move sideways until the USD liquidity conditions improve. In the second scenario, Bitcoin is rallying because the market is paving the way for a resumption of Fed US dollar printing. If this happens, two possible options can be envisaged. In the first option, if the Fed doesn’t pivot, or if multiple Fed executives talk about a pivot expectation even after “good” CPI pressures, Bitcoin could likely slide back to previous lows. In the second option, if the Fed continues with a pivot, Bitcoin continues its strong performance and this rally can be expected to be the start of a bull market.

Investors want to believe that they are heading towards a bull market. However, you may actually be faced with a combination of the first option of Scenario 1 and Scenario 2. This may cause some hesitations in purchasing decisions. While we expect a Fed pivot to occur, it is not thought to happen simply because the CPI is in a bearish trend. Powell; It has publicly stated that it focuses on the interaction between wage growth (US hourly earnings) and core personal consumption expenditures (Core PCE), rather than relying on the CPI as a measure of inflation. However, both CPI and Core CPI are not a good measure for inflation. Basic personal consumption expenditures are insufficient to reach an accurate conclusion as they do not include food and energy expenditures. Because people start to complain not when the prices of plasma TVs increase, but when the prices of bread increase 100%.